Shoppers hold back as U.S. consumer confidence retreats

Retail sales in the U.S. rose less than forecast and consumer confidence fell to a five-month low, signaling weakness in the world’s largest economy days before Federal Reserve policy makers meet to consider paring stimulus.

Purchases climbed 0.2% in August, the smallest gain in four months, after a revised 0.4% July advance that was bigger than previously estimated, the Commerce Department reported today in Washington. The Thomson Reuters/University of Michigan’s preliminary September gauge of sentiment dropped more than projected, to 76.8 from 82.1.

“The consumer has lost a bit of enthusiasm,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit and the second-best forecaster of retail sales the past two years, according to data compiled by Bloomberg. “Retail sales are still growing, though not as solidly as before.”

Higher payroll taxes, limited employment opportunities and restrained income growth are testing consumers’ desire to shop. The data, which followed a smaller-than-forecast increase in August payrolls, sent Treasuries higher on bets Fed policy makers will throttle back more slowly on the pace of bond purchases aimed at boosting the economy.

The yield on the 10-year Treasury note fell two basis points, or 0.02 percentage point, to 2.89% at 12:46 p.m. in New York. The Standard & Poor’s 500 Index climbed 0.2% to 1,686.76 as it headed for its best week since July.

U.K. Economy

American companies may find relief in a global economy that’s shown signs of picking up. Economists raised their growth estimates for U.K. gross domestic product to 1.3% this year and 2% in 2014, according to a Bloomberg survey median of 48 projections. They previously projected 1% growth in 2013 and 1.7% next year.

The median U.S. retail sales forecast of economists surveyed by Bloomberg called for a 0.5% advance. Estimates of the 85 economists ranged from gains of 0.2% to 0.9% after a previously reported 0.2% increase in July.

Eight of 13 major categories showed increases last month, led by auto dealerships, electronics outlets and furniture stores, according to today’s Commerce Department report. Purchases of building materials, clothing and sporting goods fell. Sales excluding autos rose 0.1% after a 0.6% rise in July.

“The consumer continues to tag along slowly but surely,” said Eugenio Aleman, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We have to see better job growth, better income growth.”